Prepare to pay in excess of R4 000 when cancelling your bond - just one of seven possible expenses you need to budget for accordingly, suggest the experts.
Make sure to take the following seven possible expenses into account and budget accordingly:
Bond cancellation costs
If you have a bond on the property you're selling, there will be a cost to cancelling the bond. The cost varies from bank to bank but prepare to pay in excess of R4 000. "Be sure to check this with your bank beforehand and plan for the expense, which is payable upon transfer, accordingly," Viljoen advises.
A seller needs to give the bank written notice, 90 days in advance, before consolidating the bond in full as a result of sale, or risk incurring a notice period penalty.
"Failing to provide notice in good time will result in 'bond notice period penalty interest, which is a significant but avoidable expense."
In some cases the transfer process may also incur costs for the seller, but only really happens if the sale of the property is finalised before the bank is notified, which then results in penalty interest. "If you need to settle other fees with the money available in your bond to do so before issuing the bank with notice of bond cancellation," Viljoen recommends.
SEE: When do you have the right to cancel a deed of sale due to Covid-19 complications?
Compliance costs
Compliance certificates, which includes electrical, gas, plumbing, beetle and electric fence, are the seller's responsibility and must all be in order before a property can be transferred. "These make feel like grudge payments but they are in place to protect the seller so make sure to budget for at R500 per compliance certificate," Viljoen explains.
Also note that the cost of the certificate does not include the costs of anything that needs to be fixed or repaired, based on the findings of the inspection.
The normal process is that only after the offer to purchase is signed, will the seller “get around to dealing with” the Conveyancer’s requests for paperwork. So, the usual process of assembling the paperwork, only after the property has been sold can drag out the transfer considerably - already a 2- to 3-month long process, calculated from the date of sale. However, there needn’t be all these delays, if sellers attend to the applicable points in list below - before the property is sold, says Conveyancing Attorney Denoon Sampson, Denoon Sampson Ndlovu Inc.
"The results will be registration of transfer in just a third of the usual time," says Sampson, "Some sellers are so desperate that they will do anything to expedite the process. On the other hand, some sellers are reluctant to spend money on fixing up the property in case the sale collapses," he states.
ALSO SEE: Speed up your property transfer in a 'third of the time' with this checklist
Agent commission
The agent's commission is the seller's responsibility to pay and is usually calculated as a percentage of the purchase price of the property.
"We often hear complaints about this 'cost' but bear in mind that the agent renders a professional service and the commission is compensation for their work in ensuring the transaction offers the best deal to both the buyer and the seller," Viljoen notes.
"Many sellers make the mistake of trying to create a list of itemised billing tasks to be completed by their real estate agent. What they fail to realise is that, ultimately, sellers are not paying for 45 hours a week with 50 marketing emails to be sent and 10 viewings to be held each month. Instead, they are paying to have their home sell as close to full value as possible. If a real estate professional was able to achieve this on the very first day the property is listed, it does not make his or her service any less valuable. Quite oppositely in fact, many sellers might even be happy to pay a higher commission rate if an agent could promise to deliver a sale in such a short time frame," says Goslett.
Rates, taxes and levies
As part of the process of selling a property the conveyancing attorneys will require a clearance certificate from the local authorities stating that all rates and taxes are fully paid. In some cases, the seller will be required to make future-dated payments of between two and six months in advance. The amount will be an approximation based on past accounts, and can be rather a large sum for the seller so it is useful to plan and budget accordingly when you decide to put your property on the market. If, however, the property is registered to the buyer in a shorter time frame the council will refund the seller.
Similarly, if the place being sold is in an estate or a sectional title property, the homeowners' association could require the seller to pay the levies a few months in advance to ensure all costs are covered while the property transfer is in process.
SEE | Property24 101 - Buyer and Seller specific advice
Taxes
A cost that does not apply in all cases but that certainly needs to be planned for if it does is Capital Gains Tax (CGT), which is the tax payable on the disposal of an asset (your property) where the proceeds exceed the base cost. CGT is the responsibility of the seller and forms part of income tax.
Craig Hutchison CEO Engel & Völkers Southern Africa, explains that CGT is not as cut and dried as it seems and it is always best to chat to a professional in terms of what is owed to “The Receiver”, as this depends on a number of factors.
“If the property that was sold is your primary residence, the first R2 million gain on the sale is CGT exempt, however, if you used part of the house for business purposes you may be liable for different tax structures,” says Hutchison.
“If the property is a secondary property, say a townhouse that you bought in order to generate rental income, the CGT structure on this would be different.”
Tenant Deposit
If you are renting the property to a tenant, keep in mind that you will need to repay their deposit with interest. "You should also make room in your budget to pay for any possible repairs in case there are any damages to the property after they vacate, adds Goslett.
Costs to move
Lastly, don't forget to take the cost of moving your things from one property to another into account. Moving costs tend to be more flexible as it depends on factors, including how far you're going, but should still be planned for.
"You may also want to consider taking insurance on the things being moved," Viljoen suggests.
“Selling a property is not a simple process but, with the right real estate professional by your side, it can be. Real estate agents deal with these kinds of transactions on a daily basis and will be able to guide you through these processes so that you are never left confused or uncertain on how to proceed at any point in the deal,” adds Goslett.
Print
